What is Insurance?

We face a lot of risks in our daily lives. Some of these lead to financial losses.
Insurance is a way of protecting against these financial losses. For a payment
(premium), an insurance company takes the responsibility of compensating your
financial losses.

Classification of Insurance

Life is full of uncertainty. Trials and tribulations abound in each and every aspect
of life. No one can truly predict or even estimate what the future has in store for
him. Life offers no guarantees by itself, except the incidences of death and
taxation.

This lack of security present throughout life can be overcome partially through
insurance. Insurance can never replace or repair a loss. But the monetary value
offered by insurance helps in adjusting to the new circumstances.

Despite offering innumerable options and immense scope, insurance can be

classified into four main categories.

• Insurance of Person

• Insurance of Property

• Insurance of Interest

• Insurance of Liability
Insurance of Person:

Under the purview of this class of insurance, the risks associated with human life
in general can be covered up to the limit specified. A person can insure his or her
life and his health against any unplanned contingencies.

In event of his death, his dependants will be reimbursed to the full amount that he
was insured for. Or if the insured person meets with an accident or suffers from an
illness that cripples him forever, he will be compensated with the complete sum
assured anyway since he may not be able to lead a normal life again.

In case, the accident is not that severe, he should be able to recover after medical
treatment and rehabilitation. If he has opted for medical cover, then his medical
expenses, treatment and medication will be paid for by his insurance policy. |

Insurance of Property:

Everyone possesses material value in the form of tangible assets. Assets can be in
the form of a landed estate or a vehicle, share holdings or plain old paper money.

Since tangible property has a physical shape and consistency, it is subject to many
risks ranging from fire, allied perils to theft and robbery. An individual's lifetime
of hard work can be wiped out in a blink of an eye.

But if a person judiciously invests in insurance for his property prior to any
unexpected contingency then he will be suitably compensated for his loss as soon
as the extent of damage is ascertained.

Insurance of Interest:
Every individual has to discharge certain specific duties. Everyone is expected to
maintain a standard of conduct. No one is infallible and no one will ever be.

Owing to an occasional error or omission committed by us, our clients or

customers might suffer a loss. In turn we might have to pay them damages or
compensation out of our own personal resources.

However, if our chosen profession qualifies for insurance of interest, then our
insurance policy will more than suffice in arranging for the funds and court
formalities that might ensue in the aftermath of legal libel.

Insurance of Liability:

Every person has to regulate his actions and behaviour so as not to cause injury or
damage to other people and their property. Everyone is personally responsible and
liable for his actions.

If due to lack of control over his actions or prejudiced behaviour, a person incurs
any liability then he has to provide compensation out of his personal resources.
Liabilities: legal, civil or criminal can have severe repercussions on social standing
and prestige besides the financial status.

By investing in liability insurance, an individual can ward off any liabilities he

might incur due to his actions and behaviour. Besides, the premiums payable on
liability insurance are fairly minimal when compared to the damages that have to
be compensated in the long run.
 IRDA: - INSURANCE REGULATORY AND
DEVELOPMENT AUTHORITY (The Authority) was
established by an Act of Parliament-Insurance Regulatory &
Development Authority Act, 1999 (ACT)- and was constituted on April 19, 2000
by a notification issued in the Gazette of India. The Authority was established with
a view to protect the interests of the holders of insurance policies, to regulate,
promote and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto. The Authority, in terms of section 13 of
Insurance Regulatory and Development Authority Act, 1999 [Act], has been
vested with the assets and liabilities of the Interim Insurance Regulatory Authority
as are available on the appointed day i.e. April 19, 2000. In terms of section 16 of
the Act a fund shall be constituted namely ‘The Insurance Regulatory and
Development Authority Fund” [Fund]. The Fund shall constitute of all
Government grants, fees and charges received by the Authority, all sums received
by the Authority from such other source as may be decided upon by the Central
government and the percentage of prescribed premium income received from the
insurer. The Fund shall be applied for meeting the salaries, allowances and other
remuneration of the members, officers and other employees of the Authorityand
the other expenses of the Authority in connection with discharge of its functions
and for the purpose of the Act.
DUTIES, POWERS AND FUNCTIONS OF IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of
IRDA..

(1)Subject to the provisions of this Act and any other law for the time being in
force, the Authority shall have the duty to regulate, promote and ensure orderly
growth of the insurance business and re-insurance business.
(2)Without prejudice to the generality of the provisions contained in sub-section
(1), the powers and functions of the Authority shall include, -
(a) issue to the applicant a certificate of registration, renew, modify, withdraw,
suspend or cancel such registration;

(b) protection of the interests of the policy holders in matters concerning

assigning of policy, nomination by policy holders, insurable interest, settlement of
insurance claim, surrender value of policy and other terms and conditions of
contracts of insurance;

(c) specifying requisite qualifications, code of conduct and practical training for
intermediary or insurance intermediaries and agents;
(d) specifying the code of conduct for surveyors and loss assessors;
(e) promoting efficiency in the conduct of insurance business;
(f) promoting and regulating professional organizations connected with the
insurance and re-insurance business;

(g) levying fees and other charges for carrying out the purposes of this Act;
(h) calling for information from, undertaking inspection of, conducting enquiries
and investigations including audit of the insurers, intermediaries, insurance
intermediaries and other organizations connected with the insurance business;
(i) control and regulation of the rates, advantages, terms and conditions that may
be offered by insurers in respect of general insurance business not so controlled
and regulated by the Tariff Advisory Committee under section 64U of the
Insurance Act, 1938 (4 of 1938);

(j) specifying the form and manner in which books of account shall be maintained
and statement of accounts shall be rendered by insurers and other insurance
intermediaries;

(k) regulating investment of funds by insurance companies;

(l) regulating maintenance of margin of solvency;
(m) adjudication of disputes between insurers and intermediaries or insurance
intermediaries;
(n) supervising the functioning of the Tariff Advisory Committee;
(o) specifying the percentage of premium income of the insurer to finance
schemes for promoting and regulating professional organizations referred to in
clause.
(p) specifying the percentage of life insurance business and general insurance
business to be undertaken by the insurer in the rural or social sector; and
(q) exercising such other powers as may be prescribed
 Life Insurance

The goal of life insurance is to provide a measure of financial security for your
family after you die. So, before purchasing a life insurance policy, you should
consider your financial situation and the standard of living you want to maintain
for your dependents or survivors. For example, who will be responsible for your
funeral costs and final medical bills? Would your family have to relocate? Will
there be adequate funds for future or ongoing expenses such as daycare, mortgage
payments and college? It is prudent to re-evaluate your life insurance policies
annually or when you experience a major life event like marriage, divorce, the
birth or adoption of a child, or purchase of a major item such as a house or
business.

Life insurance in India made its debut well over 100 years ago.
In our country, which is one of the most populated in the world, the prominence of
insurance is not as widely understood, as it ought to be. What follows is an attempt
to acquaint readers with some of the concepts of life insurance, with special
reference to LIC.

It should, however, be clearly understood that the following content is by no

means an exhaustive description of the terms and conditions of an LIC policy or
its benefits or privileges.
For more details, please contact our branch or divisional office. Any LIC Agent
will be glad to help you choose the life insurance plan to meet your needs and
render policy servicing.

The contract is valid for payment of the insured amount during:

The date of maturity, or
Specified dates at periodic intervals, or
Unfortunate death, if it occurs earlier.
Among other things, the contract also provides for the payment of premium
periodically to the Corporation by the policyholder. Life insurance is universally
acknowledged to be an institution, which eliminates 'risk', substituting certainty
for uncertainty and comes to the timely aid of the family in the unfortunate event
of death of the breadwinner.

By and large, life insurance is civilization’s partial solution to the problems caused
by death. Life insurance, in short, is concerned with two hazards that stand across
the life-path of every person:
That of dying prematurely leaves a dependent family to fend for itself.
That of living till old age without visible means of support.
Objectives OF LIC
Spread Life Insurance widely and in particular to the rural areas and to the socially
and economically backward classes with a view to reaching all insurable persons
in the country and providing them adequate financial cover against death at a
reasonable cost.
Maximize mobilization of people's savings by making insurance-linked savings
adequately attractive.
Bear in mind, in the investment of funds, the primary obligation to its
policyholders, whose money it holds in trust, without losing sight of the interest of
the community as a whole; the funds to be deployed to the best advantage of the
investors as well as the community as a whole, keeping in view national priorities
and obligations of attractive return.
Conduct business with utmost economy and with the full realization that the
moneys belong to the policyholders.
Act as trustees of the insured public in their individual and collective capacities.
Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.
Involve all people working in the Corporation to the best of their capability in
furthering the interests of the insured public by providing efficient service with
courtesy.
Promote amongst all agents and employees of the Corporation a sense of
participation, pride and job satisfaction through discharge of their duties with
dedication towards achievement of Corporate Objective

Life Insurance Is Now an Investment Tool

Life Insurance is not longer just a fund to pay your funeral. Life Insurance has
become a very valuable tool in wealth building, tax reduction, and succession
planning.

Life Insurance is very complicated. The perspective that a good practitioner will
have on a client’s need for Life insurance will depend upon many variables. Three
basic things can happen during the term of a Life Insurance Policy; the
policyholder can live, die, or become disabled. In some states, Life Insurance is
protected from creditors. Life Insurance proceeds are tax-free and can be applied
to partnerships, corporations, LLCs and trusts.
Cash Value Policies

The type of Life Insurance that comes to mind upon the mind is what you know as
Term (the type you see on the internet and in commercials).

Term Life is pure insurance; it can be very simple—with cash value received at
the end of the term; but there are now different types, which complicate the
structure of the terms. The main goal of Term Life policies is to pay a lump sum to
a beneficiary upon the death of the policy owner. This provides some extent of
asset protection for a family, in the event that a spouse dies; the family is provided
for with a lump sum cash payment.

Whole Life Insurance provides permanent protection for dependents while

building a cash value account of the policy owner. With this type of insurance, the
insurance company manages the policies various accounts. It pays a death benefit
to the beneficiary named and offers low-risk, tax-free cash accumulation: it allows
the death benefit to vary in relation to the fund returns of the cash value account: it
provides for borrowing from the policy during the policy lifetime. There is no
guarantee on the cash value.

Universal Life Insurance provides permanent protection for your dependents and
is more flexible than whole or variable life. It pays a death benefit to the named
beneficiary and offers a low risk cash value account and tax deferred
accumulation: it allows the policy holder to earn market rates of interest on the
cash value of the account: it offers the right to borrow or withdraw from the policy
during your lifetime.

Universal Variable Life is the type of insurance that offers control of cash value
account policy and has multiple features. It pays a death benefit to the beneficiary
and offers low risk tax deferred cash value options: it offers separate accounts for
investment in such as money market, stock, and bond funds: it the policy holder to
make withdrawals or to borrow from the policy during. There are penalties for
early termination.

Life insurance has to be worked into a plan involving the protection, investing,
and planning of all your assets.